Before the 2007 recession, the majority of Americans were not putting much thought into their emergency savings account. Without any “just in case” emergency funds, when people starting getting laid off and being forced to take pay-cuts, many no longer could afford their lifestyle. Some saw their homes go into foreclosure, while others had to deal with the constant calls from bill collectors.
Since then, while the economy has started to rebound and some are trying to save for emergencies, almost half of Americans still have more credit card debt than that saved in emergency funds. Bankrate.com conducted a survey by questioning 1,004 participants over the phone. This is the third year in a row the company has conducted this survey.
In 2011, 52 percent reported having more in savings than in credit card debt. The following year, in 2012, the overall percentage increased to 54 percent. In this most recent survey, 55 percent reported having more in savings than in credit card debt.
At first glance, this certainly seems encouraging. More and more are starting to save for emergencies. However, Greg McBride, who is a senior financial analyst with Bankrate.com, said that people are still not saving enough. Even with the better overall economic situation of the U.S., not enough attention is being given to saving for an emergency.
The issue is that, even though the economy has improved some, without money in savings, Florida residents will not be able to pay for emergencies. For example, if suddenly a homeowner comes down with a debilitating disease, there will be medical bills. However, since there is no extra money put aside to pay these bills, the homeowner will have to dip into the funds he uses for his other bills, like his credit card and mortgage. This in turn can lead into a vicious cycle where the homeowner owes money to multiple entities and just cannot keep up. In some cases, the threat of foreclosure can become very real.
In cases like this hypothetical one, or really any situations where debt is becoming overwhelming, instead of continuing to stress out, talk with an attorney who has experience handling debt relief cases.
Source: ABC News, “Nearly Half of Americans Have More Credit Card Debt Than Savings”, Susanna Kim, Feb. 25, 2013